N-Q 1 a09-23777_2nq.htm N-Q

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

 

FORM N-Q

 

QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF REGISTERED
MANAGEMENT INVESTMENT COMPANY

 

Investment Company Act file number

811-8092

 

 

Western Asset Worldwide Income Fund Inc.

(Exact name of registrant as specified in charter)

 

55 Water Street, New York, NY

 

10041

(Address of principal executive offices)

 

(Zip code)

 

Robert I. Frenkel, Esq.
Legg Mason & Co., LLC
100 First Stamford Place
Stamford, CT 06902

(Name and address of agent for service)

 

Registrant's telephone number, including area code:

1-888-777-0102

 

 

Date of fiscal year end:

October 31

 

 

 

 

Date of reporting period:

July 31, 2009

 

 



 

ITEM 1.                  SCHEDULE OF INVESTMENTS

 



 

WESTERN ASSET WORLDWIDE

INCOME FUND INC.

 

FORM N-Q

JULY 31, 2009

 



 

Western Asset Worldwide Income Fund Inc.

 

Schedule of Investments (unaudited)

 

July 31, 2009

 

Face
Amount†

 

 

 

Security

 

Value

 

SOVEREIGN BONDS — 48.1%

 

 

 

Argentina — 2.0%

 

 

 

 

 

 

 

Republic of Argentina:

 

 

 

5,000,000

 

DEM

 

10.500% due 11/14/02 (a)

 

$

610,430

 

3,500,000

 

DEM

 

7.000% due 3/18/04 (a)

 

427,301

 

2,399,000

 

 

 

Bonds, 7.000% due 9/12/13

 

1,414,677

 

 

 

 

 

GDP Linked Securities:

 

 

 

1,700,000

 

EUR

 

1.262% due 12/15/35 (b)

 

83,608

 

1,565,000

 

 

 

1.330% due 12/15/35 (b)

 

62,209

 

9,904,661

 

ARS

 

1.383% due 12/15/35 (b)

 

106,669

 

 

 

 

 

Medium-Term Notes:

 

 

 

1,800,000

 

EUR

 

7.000% due 3/18/04 (a)

 

429,803

 

2,000,000,000

 

ITL

 

7.000% due 3/18/04 (a)

 

235,595

 

 

 

 

 

Total Argentina

 

3,370,292

 

Brazil — 5.4%

 

 

 

 

 

 

 

 

 

 

 

Brazil Nota do Tesouro Nacional:

 

 

 

11,594,000

 

BRL

 

10.000% due 7/1/10

 

6,264,437

 

3,478,000

 

BRL

 

10.000% due 1/1/12

 

1,824,347

 

860,000

 

 

 

Federative Republic of Brazil, 7.125% due 1/20/37

 

951,160

 

 

 

 

 

Total Brazil

 

9,039,944

 

Colombia — 3.8%

 

 

 

 

 

 

 

 

 

Republic of Colombia:

 

 

 

4,385,000

 

 

 

7.375% due 9/18/37

 

4,527,513

 

1,590,000

 

 

 

Senior Notes, 7.375% due 3/18/19

 

1,733,100

 

 

 

 

 

Total Colombia

 

6,260,613

 

Gabon — 0.6%

 

 

 

 

 

 

 

993,000

 

 

 

Gabonese Republic, 8.200% due 12/12/17 (c)

 

955,763

 

Indonesia — 2.1%

 

 

 

 

 

 

 

 

 

 

Republic of Indonesia:

 

 

 

5,020,000,000

 

IDR

 

10.250% due 7/15/22

 

495,907

 

10,328,000,000

 

IDR

 

11.000% due 9/15/25

 

1,033,464

 

9,706,000,000

 

IDR

 

10.250% due 7/15/27

 

900,953

 

11,529,000,000

 

IDR

 

Bonds, 9.750% due 5/15/37

 

986,905

 

 

 

 

 

Total Indonesia

 

3,417,229

 

Panama — 4.1%

 

 

 

 

 

 

 

 

 

 

 

Republic of Panama:

 

 

 

3,202,000

 

 

 

7.250% due 3/15/15

 

3,506,190

 

1,290,000

 

 

 

9.375% due 4/1/29

 

1,631,850

 

1,719,000

 

 

 

6.700% due 1/26/36

 

1,740,487

 

 

 

 

 

Total Panama

 

6,878,527

 

Peru — 5.5%

 

 

 

 

 

 

 

 

 

 

 

Republic of Peru:

 

 

 

2,467,000

 

 

 

8.750% due 11/21/33

 

3,028,242

 

3,889,000

 

 

 

Bonds, 6.550% due 3/14/37

 

3,850,110

 

2,000,000

 

 

 

Global Bonds, 7.350% due 7/21/25

 

2,173,000

 

 

 

 

 

Total Peru

 

9,051,352

 

Russia — 8.8%

 

 

 

 

 

 

 

 

 

 

 

Russian Federation:

 

 

 

173,000

 

 

 

12.750% due 6/24/28 (c)

 

256,473

 

 

See Notes to Schedule of Investments.

 

1



 

Western Asset Worldwide Income Fund Inc.

 

Schedule of Investments (unaudited) (continued)

 

July 31, 2009

 

Face
Amount†

 

 

 

Security

 

Value

 

Russia — 8.8% (continued)

 

 

 

14,083,200

 

 

 

7.500% due 3/31/30 (c)

 

$

14,378,947

 

 

 

 

 

Total Russia

 

14,635,420

 

Turkey — 8.5%

 

 

 

 

 

 

 

 

 

 

 

Republic of Turkey:

 

 

 

1,490,000

 

 

 

11.500% due 1/23/12

 

1,750,750

 

730,000

 

 

 

11.000% due 1/14/13

 

870,525

 

425,000

 

 

 

7.250% due 3/15/15

 

456,068

 

3,822,000

 

 

 

11.875% due 1/15/30

 

5,990,985

 

463,000

 

 

 

Collective Action Securities, Notes, 9.500% due 1/15/14

 

538,816

 

4,384,000

 

 

 

Notes, 6.875% due 3/17/36

 

4,186,720

 

340,000

 

 

 

Senior Notes, 7.500% due 7/14/17

 

361,675

 

 

 

 

 

Total Turkey

 

14,155,539

 

United Arab Emirates — 0.3%

 

 

 

500,000

 

 

 

MDC-GMTN B.V., Senior Notes, 5.750% due 5/6/14 (c)

 

514,281

 

Venezuela — 7.0%

 

 

 

 

 

 

 

Bolivarian Republic of Venezuela:

 

 

 

365,000

 

 

 

8.500% due 10/8/14

 

271,925

 

9,837,000

 

 

 

5.750% due 2/26/16 (c)

 

5,853,015

 

2,234,000

 

 

 

7.650% due 4/21/25

 

1,290,135

 

 

 

 

 

Collective Action Securities:

 

 

 

5,996,000

 

 

 

9.375% due 1/13/34

 

3,912,390

 

445,000

 

 

 

Notes, 10.750% due 9/19/13

 

380,475

 

 

 

 

 

Total Venezuela

 

11,707,940

 

 

 

 

 

TOTAL SOVEREIGN BONDS
(Cost — $87,247,251)

 

79,986,900

 

CORPORATE BONDS & NOTES — 46.1%

 

 

 

Brazil — 5.9%

 

 

 

1,470,000

 

 

 

Globo Communicacoes e Participacoes SA, Senior Bonds,
7.250% due 4/26/22 (c)

 

1,479,188

 

 

 

 

 

GTL Trade Finance Inc.:

 

 

 

400,000

 

 

 

7.250% due 10/20/17 (c)

 

414,500

 

756,000

 

 

 

Senior Notes, 7.250% due 10/20/17 (c)

 

783,405

 

890,000

 

 

 

Odebrecht Finance Ltd., 7.500% due 10/18/17 (c)

 

911,138

 

 

 

 

 

Vale Overseas Ltd., Notes:

 

 

 

1,139,000

 

 

 

8.250% due 1/17/34

 

1,329,846

 

4,861,000

 

 

 

6.875% due 11/21/36

 

4,924,771

 

 

 

 

 

Total Brazil

 

9,842,848

 

China — 0.3%

 

 

 

 

 

 

 

470,000

 

 

 

Galaxy Entertainment Finance Co., Ltd., Senior Notes,
6.218% due 12/15/10 (b)(c)

 

448,850

 

Colombia — 0.6%

 

 

 

 

 

 

 

 

 

EEB International Ltd.:

 

 

 

300,000

 

 

 

8.750% due 10/31/14 (c)

 

318,750

 

550,000

 

 

 

Senior Bonds, 8.750% due 10/31/14 (c)

 

584,375

 

 

 

 

 

Total Colombia

 

903,125

 

India — 0.1%

 

 

 

 

 

 

 

244,000

 

 

 

ICICI Bank Ltd., Subordinated Bonds, 6.375% due 4/30/22 (b)(c)

 

192,939

 

Ireland — 1.5%

 

 

 

 

 

 

 

2,465,000

 

 

 

VIP Finance Ireland Ltd. for OJSC Vimpel Communications, Loan Participation Notes, Secured Notes, 8.375% due 4/30/13 (c)

 

2,419,205

 

 

See Notes to Schedule of Investments.

 

2



 

Western Asset Worldwide Income Fund Inc.

 

Schedule of Investments (unaudited) (continued)

 

July 31, 2009

 

Face
Amount†

 

 

 

Security

 

Value

 

CORPORATE BONDS & NOTES — 46.1% (continued)

 

 

 

Kazakhstan — 1.8%

 

 

 

3,230,000

 

 

 

KazMunaiGaz Finance Sub B.V., Senior Notes, 8.375% due 7/2/13 (c)

 

$

3,047,698

 

Mexico — 12.8%

 

 

 

 

 

 

 

1,420,000

 

 

 

America Movil SAB de CV, Senior Notes, 5.625% due 11/15/17

 

1,401,580

 

 

 

 

 

Axtel SAB de CV, Senior Notes:

 

 

 

110,000

 

 

 

11.000% due 12/15/13

 

110,825

 

4,310,000

 

 

 

7.625% due 2/1/17 (c)

 

3,674,275

 

790,000

 

 

 

7.625% due 2/1/17 (c)

 

675,450

 

320,000

 

 

 

Grupo Televisa SA, Senior Notes, 6.625% due 3/18/25

 

303,390

 

120,000

 

 

 

Kansas City Southern de Mexico, Senior Notes, 9.375% due 5/1/12

 

118,800

 

9,990,000

 

 

 

Pemex Project Funding Master Trust, Senior Bonds, 6.625% due 6/15/35

 

9,482,698

 

4,900,000

 

 

 

Petroleos Mexicanos, 8.000% due 5/3/19 (c)

 

5,549,250

 

 

 

 

 

Total Mexico

 

21,316,268

 

Russia — 15.8%

 

 

 

 

 

 

 

 

 

 

 

Evraz Group SA, Notes:

 

 

 

1,740,000

 

 

 

8.875% due 4/24/13 (c)

 

1,522,500

 

845,000

 

 

 

8.875% due 4/24/13 (c)

 

741,488

 

930,000

 

 

 

9.500% due 4/24/18 (c)

 

790,500

 

750,000

 

 

 

Gaz Capital SA, Notes, 8.625% due 4/28/34 (c)

 

785,625

 

4,150,000

 

 

 

LUKOIL International Finance BV, Notes, 6.356% due 6/7/17 (c)

 

3,838,750

 

 

 

 

 

RSHB Capital, Loan Participation Notes:

 

 

 

3,020,000

 

 

 

Notes, 9.000% due 6/11/14 (c)

 

3,233,514

 

 

 

 

 

Secured Notes:

 

 

 

1,624,000

 

 

 

7.175% due 5/16/13 (c)

 

1,630,171

 

3,959,000

 

 

 

7.125% due 1/14/14 (c)

 

3,998,590

 

1,790,000

 

 

 

7.125% due 1/14/14 (c)

 

1,791,611

 

 

 

 

 

Senior Secured Notes:

 

 

 

460,000

 

 

 

7.175% due 5/16/13 (c)

 

467,475

 

854,000

 

 

 

6.299% due 5/15/17 (c)

 

772,870

 

 

 

 

 

TNK-BP Finance SA:

 

 

 

113,000

 

 

 

7.875% due 3/13/18 (c)

 

103,678

 

 

 

 

 

Senior Notes:

 

 

 

1,021,000

 

 

 

7.500% due 3/13/13 (c)

 

1,008,237

 

2,850,000

 

 

 

7.500% due 7/18/16 (c)

 

2,643,375

 

950,000

 

 

 

7.500% due 7/18/16 (c)

 

890,625

 

400,000

 

 

 

7.875% due 3/13/18 (c)

 

366,000

 

360,000

 

 

 

UBS Luxembourg SA for OJSC Vimpel Communications, Loan Participation Notes, 8.250% due 5/23/16 (c)

 

324,450

 

1,430,000

 

 

 

Vimpel Communications, Loan Participation Notes,
8.375% due 4/30/13 (c)

 

1,390,675

 

 

 

 

 

Total Russia

 

26,300,134

 

Thailand — 2.4%

 

 

 

 

 

 

 

 

 

True Move Co., Ltd.:

 

 

 

270,000

 

 

 

10.750% due 12/16/13 (c)

 

240,300

 

3,880,000

 

 

 

10.375% due 8/1/14 (c)

 

3,395,000

 

320,000

 

 

 

Notes, 10.750% due 12/16/13 (c)

 

284,800

 

 

 

 

 

Total Thailand

 

3,920,100

 

United Kingdom — 2.0%

 

 

 

 

22,771,000

 

RUB

 

HSBC Bank PLC, Credit-Linked Notes, (Russian Agricultural Bank), 8.900% due 12/20/10 (c)

 

501,149

 

2,830,000

 

 

 

Vedanta Resources PLC, Senior Notes, 8.750% due 1/15/14 (c)

 

2,794,625

 

 

 

 

 

Total United Kingdom

 

3,295,774

 

 

See Notes to Schedule of Investments.

 

3



 

Western Asset Worldwide Income Fund Inc.

 

Schedule of Investments (unaudited) (continued)

 

July 31, 2009

 

Face
Amount†

 

 

 

Security

 

Value

 

CORPORATE BONDS & NOTES — 46.1% (continued)

 

 

 

United States — 2.9%

 

 

 

420,000

 

 

 

Celulosa Arauco y Constitucion SA, Senior Notes, 7.250% due 7/29/19 (c)

 

$

436,582

 

830,000

 

 

 

Centrais Eletricas Brasileiras SA, Senior Notes, 6.875% due 7/30/19 (c)

 

843,488

 

1,240,000

 

 

 

Ecopetrol SA, Notes, 7.625% due 7/23/19 (c)

 

1,302,000

 

830,000

 

 

 

Empresas Publicas de Medellin ESP, Senior Notes, 7.625% due 7/29/19 (c)

 

864,860

 

140,000

 

 

 

Freeport-McMoRan Copper & Gold Inc., Senior Notes, 8.375% due 4/1/17

 

148,610

 

1,230,000

 

 

 

Ras Laffan Liquefied Natural Gas Co., Ltd. III, Senior Secured Bonds, 5.500% due 9/30/14 (c)

 

1,263,191

 

 

 

 

 

Total United States

 

4,858,731

 

 

 

 

 

TOTAL CORPORATE BONDS & NOTES
(Cost — $74,923,861)

 

76,545,672

 

COLLATERALIZED SENIOR LOANS — 0.5%

 

 

 

United States — 0.5%

 

 

 

 

 

 

 

Ashmore Energy International:

 

 

 

114,773

 

 

 

Synthetic Revolving Credit Facility, 3.288% due 3/30/14 (b)

 

97,844

 

898,471

 

 

 

Term Loan, 4.220% due 3/30/14 (b)

 

765,947

 

 

 

 

 

TOTAL COLLATERALIZED SENIOR LOANS
(Cost — $961,936)

 

863,791

 

 

 

 

 

 

 

 

 

Warrants

 

 

 

 

 

 

 

WARRANTS — 0.3%

 

 

 

 

 

23,180

 

 

 

Bolivarian Republic of Venezuela, Oil-linked payment obligations,
Expires 4/15/20*

(Cost - $0)

 

486,780

 

 

 

 

 

TOTAL INVESTMENTS BEFORE SHORT-TERM INVESTMENTS

(Cost — $163,133,048)

 

157,883,143

 

 

 

 

 

 

 

 

 

Face
Amount†

 

 

 

 

 

 

 

SHORT-TERM INVESTMENTS — 5.0%

 

 

 

U.S. Government Agency — 0.2%

 

 

 

386,000

 

 

 

Federal National Mortgage Association (FNMA), Discount Notes,
0.401% due 1/25/10 (d)(e)(f)

(Cost - $385,249)

 

385,521

 

Repurchase Agreement — 4.8%

 

 

 

7,891,000

 

 

 

Morgan Stanley tri-party repurchase agreement dated 7/31/09, 0.150% due 8/3/09; Proceeds at maturity - $7,891,099; (Fully collateralized by U.S. government agency obligation, 6.750% due 9/15/29;
Market value - $8,218,333)

(Cost - $7,891,000)

 

7,891,000

 

 

 

 

 

TOTAL SHORT-TERM INVESTMENTS
(Cost — $8,276,249)

 

8,276,521

 

 

 

 

 

TOTAL INVESTMENTS — 100.0% (Cost — $171,409,297#)

 

$

166,159,664

 

 

 

 

 

 

 

 

 

*

Non-income producing security.

 

 

 

Face amount denominated in U.S. dollars, unless otherwise noted.

 

 

 

(a)

Security is currently in default.

 

 

 

(b)

Variable rate security. Interest rate disclosed is that which is in effect at July 31, 2009.

 

 

 

(c)

Security is exempt from registration under Rule 144A of the Securities Act of 1933. This security may be resold in transactions that are exempt from registration, normally to qualified institutional buyers. This security has been deemed liquid pursuant to guidelines approved by the Board of Directors, unless otherwise noted.

(d)

On September 7, 2008, the Federal Housing Finance Agency placed Fannie Mae and Freddie Mac into conservatorship.

(e)

Rate shown represents yield-to-maturity.

 

 

 

(f)

All or a portion of this security is held as collateral for open futures contracts.

 

 

 

#

Aggregate cost for federal income tax purposes is substantially the same.

 

 

 

 

See Notes to Schedule of Investments.

 

4



 

Western Asset Worldwide Income Fund Inc.

 

Schedule of Investments (unaudited) (continued)

 

July 31, 2009

 

 

Abbreviations used in this schedule:

 

 

 

 

ARS - Argentine Peso

 

 

 

 

BRL - Brazilian Real

 

 

 

 

DEM - German Mark

 

 

 

 

EUR - Euro

 

 

 

 

GDP - Gross Domestic Product

 

 

 

 

IDR - Indonesian Rupiah

 

 

 

 

ITL - Italian Lira

 

 

 

 

OJSC - Open Joint Stock Company

 

 

 

 

RUB - Russian Ruble

 

 

 

See Notes to Schedule of Investments.

 

5



 

Notes to Schedule of Investments (unaudited)

 

1. Organization and Significant Accounting Policies

 

Western Asset Worldwide Income Fund Inc. (the “Fund”) was incorporated in Maryland on October 21, 1993 and is registered as a non-diversified, closed-end management investment company under the Investment Company Act of 1940, as amended (the “1940 Act”). The Fund’s investment objective is to maintain a high level of current income. As a secondary objective, the Fund seeks to maximize total return.

 

The following are significant accounting policies consistently followed by the Fund and are in conformity with U.S. generally accepted accounting principles (“GAAP”).

 

(a) Investment Valuation.  Debt securities are valued at the mean between the last quoted bid and asked prices provided by an independent pricing service that are based on transactions in debt obligations, quotations from bond dealers, market transactions in comparable securities and various other relationships between securities. Equity securities for which market quotations are available are valued at the last reported sales price or official closing price on the primary market or exchange on which they trade. Publicly traded foreign government debt securities are typically traded internationally in the over-the-counter market, and are valued at the mean between the last quoted bid and asked prices as of the close of business of that market. Futures contracts are valued daily at the settlement price established by the board of trade or exchange on which they are traded. When prices are not readily available, or are determined not to reflect fair value, such as when the value of a security has been significantly affected by events after the close of the exchange or market on which the security is principally traded, but before the Fund calculates its net asset value, the Fund may value these securities at fair value as determined in accordance with the procedures approved by the Fund’s Board of Directors. Short-term obligations with maturities of 60 days or less are valued at amortized cost, which approximates fair value.

 

The Fund adopted Statement of Financial Accounting Standards No. 157 (“FAS 157”).  FAS 157 establishes a single definition of fair value, creates a three-tier hierarchy as a framework for measuring fair value based on inputs used to value the Fund’s investments, and requires additional disclosure about fair value. The hierarchy of inputs is summarized below.

 

·                  Level 1 – quoted prices in active markets for identical investments

·                  Level 2 – other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.)

·                  Level 3 – significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments)

 

The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.

 

The following is a summary of the inputs used in valuing the Fund’s assets carried at fair value:

 

Description

 

Quoted
Prices
(Level 1)

 

Other
Significant
Observable
Inputs

(Level 2)

 

Significant
Unobservable
Inputs

(Level 3)

 

Total

 

Long-term investments:

 

 

 

 

 

 

 

 

 

Sovereign bonds

 

 

$

79,986,900

 

 

$

79,986,900

 

Corporate bonds & notes

 

 

76,545,672

 

 

76,545,672

 

Collateralized senior loans

 

 

863,791

 

 

863,791

 

Warrants

 

 

486,780

 

 

486,780

 

Total long-term investment

 

 

157,883,143

 

 

157,883,143

 

Short-term investments:

 

 

 

 

 

 

 

 

 

U.S. government agency

 

 

385,521

 

 

385,521

 

Repurchase agreement

 

 

7,891,000

 

 

7,891,000

 

Total short-term investments

 

 

8,276,521

 

 

8,276,521

 

Total investments

 

 

166,159,664

 

 

166,159,664

 

Futures contract

 

$

(270,553

)

 

 

(270,553

)

Interest rate swaps

 

 

(38,408

)

 

(38,408

)

Total

 

$

(270,553

)

$

166,121,256

 

 

$

165,850,703

 

 

6



 

Notes to Schedule of Investments (unaudited) (continued)

 

Following is a reconciliation of investments in which significant unobservable inputs (Level 3) were used in determining fair value:

 

Investments in Securities

 

Sovereign
Bonds

 

Warrants

 

Total

 

Balance as of October 31, 2008

 

$

4,267,367

 

$

730,170

 

$

4,997,537

 

Accrued premiums/discounts

 

62,560

 

 

62,560

 

Realized gain/(loss)1

 

(110,054

)

 

(110,054

)

Change in unrealized appreciation (depreciation)2

 

53,678

 

(243,390

)

(189,712

)

Net purchases (sales)

 

(903,267

)

 

(903,267

)

Net transfers in and/or out of Level 3

 

(3,370,284

)

(486,780

)

(3,857,064

)

Balance as of July 31, 2009

 

 

 

 

 

 

 

Net unrealized appreciation (depreciation) for investments in securities still held at July 31, 2009

 

 

 

 

 

 

 

 

 

1

This amount is included in net realized gain (loss) from investment.

2

Change in unrealized appreciation (depreciation) includes net unrealized appreciation (depreciation) resulting from changes in investment values during the reporting period and the reversal of previously recorded unrealized appreciation (depreciation) when gains or losses are realized.

 

(b) Repurchase Agreements.  When entering into repurchase agreements, it is the Fund’s policy that its custodian or a third party custodian take possession of the underlying collateral securities, the market value of which, at all times, at least equals the principal amount of the repurchase transaction, including accrued interest. To the extent that any repurchase transaction exceeds one business day, the value of the collateral is marked-to-market daily to ensure the adequacy of the collateral. If the seller defaults, and the market value of the collateral declines or if bankruptcy proceedings are commenced with respect to the seller of the security, realization of the collateral by the Fund may be delayed or limited.

 

(c) Loan Participations The Fund may invest in loans arranged through private negotiation between one or more financial institutions. The Fund’s investment in any such loan may be in the form of a participation in or an assignment of the loan. In connection with purchasing participations, the Fund generally will have no right to enforce compliance by the borrower with the terms of the loan agreement, nor any rights of set-off against the borrower and the Fund may not benefit directly from any collateral supporting the loan in which it has purchased the participation.

 

The Fund assumes the credit risk of the borrower, the lender that is selling the participation and any other persons interpositioned between the Fund and the borrower. In the event of the insolvency of the lender selling the participation, the Fund may be treated as a general creditor of the lender and may not benefit from any set-off between the lender and the borrower.

 

(d) Futures Contracts.  The Fund may use futures contracts to gain exposure to, or hedge against, changes in the value of equities, interest rates or foreign currencies. A futures contract represents a commitment for the future purchase or sale of an asset at a specified price on a specified date.

 

Upon entering into a futures contract, the Fund is required to deposit with a broker cash or cash equivalents in an amount equal to a certain percentage of the contract amount. This is known as the ‘‘initial margin.’’ Subsequent payments (‘‘variation margin’’) are made or received by the Fund each day, depending on the daily fluctuation in the value of the contract. For certain futures including foreign denominated futures [For reports that include multiple funds, the appropriate funds need to be identified and listed], variation margin is not settled daily, but is recorded as a net variation margin payable or receivable. Futures contracts are valued daily at the settlement price established by the board of trade or exchange on which they are traded. The daily changes in contract value are recorded as unrealized gains or losses in the Statement of Operations and the Fund recognizes a realized gain or loss when the contract is closed.

 

Futures contracts involve, to varying degrees, risk of loss in excess of the amounts reflected in the financial statements. In addition, there is the risk that the Fund may not be able to enter into a closing transaction because of an illiquid secondary market.

 

7



 

Notes to Schedule of Investments (unaudited) (continued)

 

(e) Swap Agreements. The Fund may invest in swaps for the purpose of managing their exposure to interest rate, credit or market risk, or for other purposes. The use of swaps involves risks that are different from those associated with ordinary portfolio transactions.

 

Interest Rate Swaps

 

The Fund may enter into interest rate swap contracts.  Interest rate swaps are agreements between two parties to exchange cash flows based on a notional principal amount. The Fund may elect to pay a fixed rate and receive a floating rate, or, receive a fixed rate and pay a floating rate on a notional principal amount. The net periodic payments received or paid on interest rate swap agreements are recognized as realized gains or losses. Interest rate swaps are marked to market daily based upon quotations from the market makers and the change, if any, is recorded as an unrealized gain or loss. A liquidation payment received or made at the termination of the swap is recognized as a realized gain or loss. The risks of interest rate swaps include changes in market conditions that will affect the value of the contract or changes in the present value of the future cash flow streams and the possible inability of the counterparty to fulfill its obligations under the agreement. The Fund’s maximum risk of loss from counterparty credit risk is the discounted net value of the cash flows to be received from the counterparty over the contract’s remaining life, to the extent that that amount is positive. This risk is mitigated by the posting of collateral by the counterparty to the Fund to cover the Fund’s exposure to the counterparty.

 

Swap contracts are marked-to-market daily and changes in value are recorded as unrealized appreciation/ (depreciation). Gains or losses are realized upon termination of the swap agreement. Periodic payments and premiums received or made by a Fund are recorded as realized gains or losses, respectively. Collateral, in the form of restricted cash or securities, may be required to be held in segregated accounts with the Fund’s custodian in compliance with the terms of the swap contracts. Securities held as collateral for swap contracts are identified in the Schedule of Investments. The risks include changes in the returns of the underlying instruments, failure of the counterparties to perform under the contracts’ terms, and the possible lack of liquidity with respect to the swap agreements.

 

As of July 31, 2009, the Brazil CDI rate was 8.61%.

 

(f) Foreign Currency Translation. Investment securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts based upon prevailing exchange rates at the date of valuation.  Purchases and sales of investment securities and income and expense items denominated in foreign currencies are translated into U.S. dollar amounts based upon prevailing exchange rates on the respective dates of such transactions.

 

Foreign security and currency transactions may involve certain considerations and risks not typically associated with those of U.S. dollar denominated transactions as a result of, among other factors, the possibility of lower levels of governmental supervision and regulation of foreign securities markets and the possibility of political or economic instability.

 

(g) Credit and Market Risk. The Fund invests in high yield and emerging market instruments that are subject to certain credit and market risks. The yields of high yield and emerging market debt obligations reflect, among other things, perceived credit and market risks. The Fund’s investment in securities rated below investment grade typically involves risks not associated with higher rated securities including, among others, greater risk related to timely and ultimate payment of interest and principal, greater market price volatility and less liquid secondary market trading. The consequences of political, social, economic or diplomatic changes may have disruptive effects on the market prices of investments held by the Fund. The Fund’s investment in non-U.S. dollar denominated securities may also result in foreign currency losses caused by devaluations and exchange rate fluctuations.

 

(h) Other Risks.  Consistent with their objective to seek high current income, certain Funds may invest in instruments whose values and interest rates are linked to foreign currencies, interest rates, indices or some other financial indicator. The value at maturity or interest rates for these instruments will increase or decrease according to the change in the indicator to which they are indexed. These securities are generally more volatile in nature, and the risk of loss of principal is greater.

 

(i) Security Transactions.  Security transactions are accounted for on a trade date basis.

 

8



 

Notes to Schedule of Investments (unaudited) (continued)

 

2.  Investments

 

At July 31, 2009, the aggregate gross unrealized appreciation and depreciation of investments for federal income tax purposes were substantially as follows:

 

Gross unrealized appreciation

 

$

8,354,477

 

Gross unrealized depreciation

 

(13,604,110

)

Net unrealized depreciation

 

$

(5,249,633

)

 

At July 31, 2009, the Fund had the following open futures contracts:

 

 

 

Number of

 

Expiration

 

Basis

 

Market

 

Unrealized

 

 

 

Contracts

 

Date

 

Value

 

Value

 

Loss

 

Contracts to Buy:

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury 10-Year Notes

 

168

 

9/09

 

$

19,973,803

 

$

19,703,250

 

$

(270,553

)

 

At July 31, 2009, the Fund held the following open swap contracts:

 

SWAP COUNTERPARTY

 

NOTIONAL AMOUNT

 

TERMINATION
DATE

 

PERIODIC
PAYMENTS
MADE BY THE
FUND ‡

 

PERIODIC
PAYMENTS
RECEIVED
BY THE
FUND ‡

 

UNREALIZED
DEPRECIATION

 

Interest Rate Swaps:

 

 

 

 

 

 

 

 

 

 

 

Credit Suisse First Boston Inc.

 

$

3,443,021

 

1/2/12

 

BRL-CDI

 

10.560%

 

$

(14,368

)*

Credit Suisse First Boston Inc.

 

4,953,550

 

1/2/12

 

BRL-CDI

 

10.510%

 

(24,040

)*

Net unrealized depreciation on open swap contracts

 

 

 

 

 

 

 

 

 

$

(38,408

)

 

‡ Percentage shown is an annual percentage rate.

* Security is valued in good faith at fair value by or under the direction of the Board of Directors (See Note 1).

 

3. Derivative Instruments and Hedging Activities

 

Financial Accounting Standards Board Statement of Financial Accounting Standards No. 161, “Disclosure about Derivative Instruments and Hedging Activities,” requires enhanced disclosure about an entity’s derivative and hedging activities.

 

The following is a summary of the Fund’s derivative instruments categorized by risk exposure at July 31, 2009.

 

 

 

Futures Contracts

 

Swap Contracts

 

 

 

Primary Underlying
Risk Disclosure

 

Unrealized Appreciation

 

Unrealized Depreciation

 

Unrealized Appreciation

 

Unrealized Depreciation

 

Total

 

Interest Rate Contracts

 

 

 

$

(270,553

)

$

201,929

 

$

(240,337

)

$

(308,961

)

 

9



 

ITEM 2.

CONTROLS AND PROCEDURES.

 

 

 

 

(a)

The registrant’s principal executive officer and principal financial officer have concluded that the registrant’s disclosure controls and procedures (as defined in Rule 30a- 3(c) under the Investment Company Act of 1940, as amended (the “1940 Act”)) are effective as of a date within 90 days of the filing date of this report that includes the disclosure required by this paragraph, based on their evaluation of the disclosure controls and procedures required by Rule 30a-3(b) under the 1940 Act and 15d-15(b) under the Securities Exchange Act of 1934.

 

 

 

 

(b)

There were no changes in the registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act) that occurred during the registrant’s last fiscal quarter that have materially affected, or are likely to materially affect the registrant’s internal control over financial reporting.

 

 

 

ITEM 3.

EXHIBITS.

 

 

 

Certifications pursuant to Rule 30a-2(a) under the Investment Company Act of 1940, as amended, are attached hereto.

 



 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

Western Asset Worldwide Income Fund Inc.

 

 

By

/s/ R. Jay Gerken

 

 

R. Jay Gerken

 

 

Chief Executive Officer

 

 

 

 

 

 

 

Date:

 September 28, 2009

 

 

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

 

By

/s/ R. Jay Gerken

 

 

R. Jay Gerken

 

 

Chief Executive Officer

 

 

 

 

 

 

 

Date: September 28, 2009

 

 

 

 

 

 

 

By

/s/ Kaprel Ozsolak

 

 

Kaprel Ozsolak

 

 

Chief Financial Officer

 

 

 

 

 

 

 

Date:

 September 28, 2009